Smart entity structuring for online sellers. Learn when to form an LLC, elect S-Corp for tax savings, protect your brands with WY/DE holding companies, and optimize your structure for volume play.
Start Simple: Single-member LLC in your home state. Scale Smart: Elect S-Corp when profit hits $60K-$80K to save on self-employment taxes. Protect Brands: WY/DE holding LLC for trademarks and IP. Go Multi-Channel: Separate operating entities for Amazon FBA, Shopify, Walmart, etc. This guide shows you exactly when and how to level up your structure.
Most Amazon FBA and e-commerce sellers start as sole proprietors—easy, but risky. The right entity structure gives you:
Entity: Sole Proprietor or Single-Member LLC. Why: Keep it simple. You're testing product-market fit. LLC gives liability protection without complexity. File Schedule C with personal tax return.
Entity: Single-Member LLC (if not already). Tax Strategy: Still pass-through (Schedule C). Consider: Registering trademarks and creating brand assets. Start planning S-Corp election for next year if profit trending toward $80K+.
Entity: LLC taxed as S-Corp. Tax Savings: $10K-$20K/year in self-employment tax. Requirements: Run payroll, pay yourself reasonable salary, quarterly estimated taxes. Brand Protection: Create separate WY/DE LLC to hold trademarks; license to operating entity.
Entity: Holding company structure. Setup: Brand/IP holding LLC (WY/DE) licenses trademarks to multiple operating LLCs (Amazon FBA LLC, Shopify LLC, Walmart LLC, etc.). Each operating LLC elects S-Corp. Benefits: Asset protection, tax optimization, easier to sell individual brands.
Strategy: Convert S-Corp to C-Corp if acquirer prefers (stock purchase vs asset purchase). Clean Up: Ensure trademarks, IP, contracts all properly assigned to entities. Valuation: Proper entity structure increases business value 15-30% in eyes of buyers.
Electing S-Corp Too Early: If profit is under $60K, S-Corp compliance costs exceed tax savings. Not Protecting Trademarks: Trademark in operating LLC = vulnerable if sued. Commingling Funds: Using business account for personal expenses pierces corporate veil. Missing Quarterly Estimated Taxes: IRS penalties add up fast. No Operating Agreement: Without OA, you lose LLC protection in many states. I'll help you avoid these pitfalls.
| Structure | Best For (Annual Profit) | Tax Rate | Complexity | Annual Savings |
|---|---|---|---|---|
| Sole Proprietor | $0-$30K | 15.3% SE tax + income tax | Very Low | $0 |
| Single-Member LLC | $0-$80K | 15.3% SE tax + income tax | Low | $0 (but liability protection) |
| LLC as S-Corp | $80K-$500K+ | ~7-10% payroll tax + income tax | Medium | $10K-$50K/year |
| Multi-Entity (Holding + Operating) | $250K+ | Optimized with S-Corp + licensing | High | $20K-$100K+/year |
Perfect for solo sellers launching on Amazon FBA, Shopify, or Etsy. Simple taxes, liability protection, low compliance.
For husband/wife teams or business partners. More admin (Form 1065) but allows profit/ownership splits and flexibility.
When profit hits $60K-$80K+, elect S-Corp to save $10K+ annually in self-employment taxes. Requires payroll but worth it.
When your Amazon FBA or e-commerce business hits $60K-$80K+ in profit, electing S-Corp status can save you $10,000-$50,000+ per year in self-employment taxes. Here's exactly how it works and when to do it.
| Scenario | $100K Profit as LLC | $100K Profit as S-Corp | Savings |
|---|---|---|---|
| Net Profit | $100,000 | $100,000 | — |
| Salary to Owner | $0 (no payroll) | $50,000 (W-2) | — |
| Distribution to Owner | $100,000 | $50,000 | — |
| Self-Employment Tax (15.3%) | $15,300 | $7,650 | $7,650 saved! |
| Income Tax (24% bracket) | ~$24,000 | ~$24,000 | — |
| Total Tax | ~$39,300 | ~$31,650 | $7,650 saved |
How it works: As LLC (default), you pay 15.3% self-employment tax on ALL $100K profit. As S-Corp, you only pay SE tax on the $50K salary. The $50K distribution avoids SE tax entirely. Same income tax either way, but huge SE tax savings.
The Strategy: Form a separate LLC in Wyoming or Delaware to hold your trademarks, domain names, and intellectual property. License those assets to your operating LLC(s) for a monthly fee. Why: If your operating business gets sued (product liability, customer injury, etc.), your valuable brand assets are protected in a separate entity creditors can't touch.
| Feature | Wyoming LLC | Delaware LLC |
|---|---|---|
| Formation Fee | $102 | $90 |
| Annual Report | $62/year | $300/year |
| Privacy | Members NOT public record | Managers disclosed; members not |
| Asset Protection | Strongest charging order protection | Strong charging order protection |
| Best For | LLCs, privacy-focused, low cost | Corporations, investor/VC preferred |
My recommendation for e-commerce brand holding: Wyoming LLC. Lower annual costs ($62 vs $300), better privacy, excellent asset protection. Delaware is better for corporations raising VC money.
I've worked with 100+ Amazon FBA and e-commerce sellers to optimize their entity structures and save tens of thousands in taxes. If your formation documents are rejected by any state for preparation errors, I'll refund my service fee in full. State fees are non-refundable once filed.
Complete the form below to begin optimizing your e-commerce business structure. I'll review your information and follow up within 1 business day with a customized strategy and pricing.
After submitting: (1) I'll review your business details and profit numbers. (2) Within 1 business day, you'll receive a customized strategy recommendation (entity type, S-Corp timing, multi-entity structure if needed). (3) I'll provide a detailed quote with pricing and timeline. (4) If you proceed, we'll begin formation immediately. Questions? Email owner@terms.law or schedule a call.